Step 2: Stop borrowing money

Unfortunately, this may be the hardest step. While there are some purchases where it may make sense to borrow money (your house, because its value may appreciate), in most cases borrowing money is simply trading time for money. So, you should always carefully consider whether you need a purchase now, or whether you can put it off until you actually have the cash in hand.

Unfortunately, this will take discipline. Credit card companies and banks have made it very easy and convenient to borrow money. Fight the urge. Make it more difficult for yourself. Take your credit cards out of your wallet. If you can, cut them up. If you can’t, put them somewhere that you cannot easily get to them. Use cash wherever possible. Even if you plan to pay off your credit cards every month, studies have shown that people are more likely to spend money when they use credit or debit cards.

Please note: I am not advocating getting rid of all your credit cards. In today's on-line environment, there are just some things where it can be safer to use a credit card (on-line purchases, reservations, etc.). While you can use a debit card for many of them, sometimes the stolen card liability limits, are able to provide more protection. In any case, I am advocating vigilance. If at all possible, do not give in to the urge to spend money that isn't already in your checking or savings account.

Need more in-depth help? Click here to see more information about the "Debt-To-Wealth" debt elimination program.